H&M seeks to source more clothes from Bangladesh (China)

Swedish fashion retailer Hennes & Mauritz AB (HM-B.SK), the world's second-largest clothing retailer, wants to source more products from Bangladesh to take advantage of cheap labor, but unrest and violent strikes present a big hurdle to expansion in the troubled country.

"The often-recurring strikes and demonstrations disrupt production and cause delays. We want to grow in Bangladesh [...] a stable market will benefit us buyers, the suppliers and the workers," H&M's head of sustainability, Helena Helmersson, told Dow Jones Newswires.

About 25% of H&M's products are made in Bangladesh and the company aims to increase this figure, but it isn't the only big retailer looking to expand there. The industry already accounts for about 80% of Bangladesh's exports and employs about 3 million people, and research company McKinsey expects apparel exports to double by 2015 and triple in 10 years, as big buyers move from China as capacity constraints and wage inflation erode profit margins.

But Bangladesh has been plagued by political turmoil, with violent street protests erupting last month following the disappearance of a leading opposition figure. In addition, working conditions remain poor, with substandard lighting, overcrowding and long working hours common.

In 2010, 21 workers were killed by a fire at a factory in Bangladesh making products for H&M and other retailers.

Furthermore, apparel workers have no real collective force in Bangladesh.

"The situation is highly fragmented," Helmersson said. "There are about 56 garment and textile workers' unions."

H&M said it aims to use its influence to apply pressure on its suppliers in Bangladesh to improve working conditions. In 2011, it held talks with government representatives, unions, and the biggest suppliers about its expansion plans and the surrounding issues.

"We told them how we would like to grow in Bangladesh, but that the ongoing instability in the country makes it difficult for us to plan production and makes us wonder if we dare grow there," Helmersson said. She added that H&M wants suppliers to set up democratic labor committees that can negotiate wages and working conditions with factory owners, and a program will be rolled out and tested this year and next.

"We are big buyers in Bangladesh and we want to take greater responsibility for working conditions there," Chief Executive Karl-Johan Persson said. "And we reward the suppliers who take the greater social responsibility with more business, larger orders and longer contracts," Persson said.

In 2011, H&M was a major buyer of ready-made garments in Bangladesh.